Most Expensive 9 American Cities

What drives costs in the most expensive cities in the U.S.? The answer is housing. But the nationwide trend of falling home prices won't knock the city with the highest cost of living, New York, out of the top spot anytime soon.

According to an index of 306 cities published by the Council for Community and Economic Research (C2ER) released last week, the cost of living in the borough of Manhattan in New York City is 128 percent higher than the national average, with an index score of 228.

The council has published the quarterly data since 1968, after it was originally published by the government, and uses the prices of 60 consumer goods and services in six categories: grocery items, housing, utilities, transportation, health care and miscellaneous items.

Housing, which is weighted the heaviest in the analysis, created challenges for the data collection with its plummeting prices across the country.

"This is the worst economy the project has seen since 1968," said Dean Frutiger, project manager of the Cost of Living Index project at C2ER.

Frutiger said the project usually does not use new home prices below $165,000 for its data collection, but he has been seeing "prices that are far below that."

"The economy forces us to be pretty flexible," he said.

Here's a list of the nine cities with the highest cost of living out of the 306 regions analyzed by C2ER.

Index Score: 228.3

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1.

Manhattan (New York), New York

While C2ER aims to collect uniform data about mortgage rates, housing prices and rental costs across the country, the densely populated area of Manhattan requires certain attention with its 1.6 million residents, according to the 2010 U.S. Census.

C2ER works with local organizations to collect data on designated days so the information is as consistent as it can be across the country.

Frutiger said C2ER usually looks at homes with four or more bedrooms at about 2,400 square feet.

"In Texas, that's a closet, but that's going to be huge in Manhattan," he said.

For that reason, C2ER will have to pro-rate housing data from New York to compare to the other cities in the index.

Index Score: 181.3

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2.

Brooklyn (New York), New York

The borough of Brooklyn creates similar challenges to that of Manhattan. With a population of 2,504,700, according to the U.S. Census, Brooklyn is the most populous of the New York's five boroughs. It is however, the second largest, which arguably may make housing more affordable than in Manhattan.

New York boroughs make it to the top of the list frequently, Frutiger said.

"I don't think anyone would be surprised looking at that," he said.

Index Score: 166.5

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3.

San Francisco, California

The cost of living is 66.5 percent higher in San Francisco than the national average. While housing is more affordable in San Francisco than in Manhattan and Brooklyn, the Golden Gate region's transportation costs and health care were slightly more expensive Brooklyn's, according to the data submitted to C2ER.

Index Score: 165.8

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4.

Honolulu, Hawaii

The cost of living in Honolulu is 65.8 percent higher than the national average, closely following San Francisco. While its housing costs are below that of San Francisco, Honolulu's five other categories -- its grocery items, utilities, transportation, health care and miscellaneous goods and services -- were higher than in San Francisco.

Index Score: 154.3

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5.

San Jose, California

San Jose may be a world away from San Francisco in terms of urban and suburban aesthetics, but it is just a one-hour drive to the south in good traffic. The heart of Silicon Valley had higher costs than San Francisco, according to the index, in the categories of utilities, transportation and healthcare.

Index Score: 147.4

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6.

Stamford, Connecticut

A suburb of New York, Stamford has a cost of living 47.4 percent higher than the national average. Though finance professionals have been known to escape to Stamford for lower costs and more real estate space, the index indicates utilities costs are higher in Stamford than in Manhattan or Brooklyn.

Index Score: 145.9

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7.

Queens (New York), New York

The largest New York City borough by area, Queens is an expensive real estate market. Though housing prices are lower than in Brooklyn, Queens had higher costs than Brooklyn for grocery items, utilities, transportation and health care.

Index Score: 144.7

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8.

Orange County, California

Encompassing the metropolitan area of Santa Ana, Anaheim and Irvine, Orange County's housing costs were higher than in Queens, New York. However, its utilities and healthcare costs were lower than those of Queens. Lacking an efficient public transit system, Orange County had transportation costs higher than those of Queens, San Francisco and San Jose.

Index Score 144.6

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9.

Washington, D.C./Arlington/Alexandria, Virginia

In previous years, Washington D.C. was not on the top ten list, but has become one of the most expensive cities in recent years, Frutiger said.

"The housing market in D.C. has remained very strong, unlike the rest of country," Frutiger said. "Housing can drive the index very easily."

Housing costs in Washington, D.C. were higher than in Orange County, but were lower than in the other cities of the top nine.